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How 2 Meridian brothers lost control of their business making popular energy shots

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Fans of energy shots produced by a Meridian company may be dismayed to learn that Rhino Rush is now being produced in Texas.

The two brothers who founded Rhino Rush have lost control of their company as a result of financial problems. Rhino Rush, the fifth-largest-selling energy-shot drink, has been taken over by the owner of the contract manufacturer that made the Meridian company’s drinks.

Rhino Rush claims the manufacturer, Raw Pharma, based in the Salt Lake City suburb of West Valley City, raided its inventory and coerced its executives into signing away their ownership.

After initially seeking bankruptcy reorganization in March, Rhino Rush said in a court filing last week in Boise that it no longer has an operating business and is unable to propose a “reasonable plan of reorganization.”

It could mean the end of the company, owned by Jeremy and Josh Swenson, at 3660 E. Lanark St. The business began in 2013 and had 10 permanent employees.

The financial woes came amid rising sales: Rhino Rush reported $5.9 million in gross revenue last year , according to bankruptcy court records, up $1.6 million from 2017.

Despite its growth, Rhino Rush failed to order as many shots as required under its contract with Raw Pharma. Rhino Rush also was continually late making payments, Raw Pharma said in answer to a companion lawsuit filed by Rhino Rush seeking return of its assets.

Raw Pharma began manufacturing and packaging Rhino Rush’s shots (1.8 ounce bottles) in 2014. Under its contract, Rhino Rush was to buy 4 million shots in grape and two other flavors within 15 months and at least 650,000 bottles each quarter after that.

“Rhino Rush was unable to perform its contractual obligations and did not place the required purchase orders of products and did not pay in full the purchase price for the products that it did order,” Raw Pharma attorney Kimbell Gourley wrote.

By 2017, Rhino Rush was behind its promised orders by by 2.4 million bottles. The companies later agreed to a new contract under which Rhino Rush pledged its assets to secure its obligations.

Raw Pharma claims Rhino Rush continued to default on its obligations in 2018 and this year. Raw Pharma said Rhino Rush owed it $1.6 million plus interest, penalty and attorneys’ fees.

Rhino Rush also claims Raw Pharma improperly seized five semitrailer-truck loads of energy drinks and equipment from Rhino Rush’s Meridian warehouse and sent them to Texas, where Raw Pharma set up a separate company, Rhino Rush 3GS, to manufacture and sell Rhino Rush drinks. Another truckload was reportedly taken to a Boise warehouse.

Raw Pharma owner Jesse McMullin obtained a power of attorney authorization from Rhino Rush part-owner Jeremy Swenson (not the Jeremy Swenson convicted in the DBSI investment scandal case) after confronting Swenson in March and threatening to go to court to shut Rhino Rush down. McMullin said he later obtained documents including a bill of sale for the company and a voluntary surrender of Rhino Rush assets, signed by Swenson and Josh Swenson, the CEO.

Rhino Rush, which admitted making late payments, said it was up to date when McMullin confronted the Swensons. It said they were coerced into signing the documents before they had a chance to think things over.

Raw Pharma said Rhino Rush was its only customer and the drink company’s financial woes were causing it problems. Raw Pharma said it acted to prevent itself from going under.

In March, Rhino Rush sought an injunction to prevent Raw Pharma from controlling Rhino Rush’s assets and to have the seized drinks and equipment returned. On March 27, U.S. Bankruptcy Judge Terry Myers in Boise denied the request. He said he was unable to find that Rhino Rush was likely to prevail.

Rhino Rush’s “submissions seem to suggest a theory of duress,” Myers wrote. “But there are limitations under Idaho law on such a contention.”

The companion lawsuit is still moving forward.

Rhino Rush trailed 2018 sales by market leader 5-Hour Energy Shot, Tweaker Energy Shot, private label energy shots and Stacker 2 Xtra Energy Shot, according to CaffeineInformer.com, a caffeine information site.

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Reporter John Sowell has worked for the Statesman since 2013. He covers business and growth issues. He grew up in Emmett and graduated from the University of Oregon.

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